How the Spanish banking situation is handled will determine the future of the euro and possibly of the larger European Union. Will German’s taxpayers and those of other solvent countries be willing to fund an even larger bailout of Spanish banks to save impecunious Spaniards? Will the citizens of EU countries outside the euro zone, such as Sweden and the U.K., be asked to chip in? Or will Spain be allowed to descend into a catastrophic 1930s-style banking crisis and Great Depression?

Spanish banking problems are not the end, but only the beginning, of European banking problems. Banks in France, the U.K. and Germany also hold large amounts of the sovereign and private debt of Portugal, Italy, Ireland, Greece and Spain. The government of Cyprus has already made an “exceptionally urgent” request for funds to recapitalize its banks, and markets are now worried about Italy’s debt, which limits Rome’s ability to deal with banking problems.

The euro zone is in a crisis, in the correct sense of the word, a turning point from which it will either recover or enter a terminal phase. One important factor that may determine the outcome is the degree of leadership in Europe.